Human Capital as Intellectual Property? Non-Competes and the Limits of IP Protection

Non-compete agreements have become increasingly common in recent years, imposed on twenty to forty percent (or more) of employees in some industries, both in the knowledge-intensive fields where they might be expected but also in the service industries on low-wage workers. As non-competes have proliferated, they have become increasingly controversial. Much of the discussion revolves around whether the agreements help or hinder innovation and economic growth. While this is also accompanied by some concern about the effect of non-competes on employees, little attention has been paid to the fact that employers use non-competes as tools for protecting intellectual property and in doing so treat human capital as form of intellectual property.

Taking the IP justification seriously—that is, examining the efficiency and utilitarian arguments surrounding non-compete agreements—reveals the troubling personal autonomy and dignitary consequences of non-compete enforcement. From an efficiency perspective, the evidence is conflicting: it is far from clear that non-compete enforcement is necessary for increased innovation and economic growth. From a personal autonomy perspective, on the other hand, it is quite clear that non-competes have a variety of negative consequences. Evaluating non-competes under an IP framework and with the principles that are applied to other forms of intellectual property makes clear that treating human capital as a form of intellectual property, and using those agreements to control that IP, is deeply problematic.